Class 38 - Minimum Wage and Rarity

The world needs no regulation...what?

Minimum wage
Companies respond to increases in minimum wage - hire less.

Rarity and Scarcity
Rarity is something we don't have a lot of (absolute concept)
Scarcity is something that is not enough to go around (relative concept)
Rare but not scarce or scarce but not rare.

Surplus and Scarcity
In a surplus, Qs > Qd. Scarcity means there are tradeoffs to get things. Surpluses describe how much supply and demand there is at a particular price.


Making things illegal:
1. Producers keep making the goods. You make a lot more when its illegal - inelastic.

Class 32 - Rationing Mechanisms - Not Fair

The challenge we are dealing with is scarcity. We use the price system to ration scarce goods. The costs are opportunity costs and they are what other consumers are willing to pay for a product is a cost for the producer.

Rationing Mechanisms:

1. Need - neediest gets it first. This seems very appealing but it's too vague. Who determines need levels?

2. Queues - first come first serve. This is the most costly. The length of the line = price/cost

3. Lottery - fairest. However, the people who value/need it more might not get the good. Basketball lottery isn't fair. In 2007 the Celtics were the 2nd worse team but got the 5th pick in the draft because of the lottery and didn't get Kevin Durant for this reason.

4. Equal shares - communism. Cutting up makes some things worth nothing and not all parts/time cut up aren't worth the same.

5. Force/Kicking Ass/Might Makes Right - costly. You can't plan and it's not fair - same people never win

6. Merit - good moral connotations but hard to say who earns merit


Evaluation Rationing Mechanisms:

Competition comes from scarcity.

1. What is the nature of competition?
-is it destructive or constructive?
-price system is the only one not destructive.
-when people focus on competition they don't focus on other things
      -but with the price system - competition focuses people on productive benefits

Class 14 - The Cost of Hearing Copacabana Over Born To Run = My Ears!

Today we talked about the axiom of scarcity and how people make choices.

We talked about how people are forced to make tradeoffs by scarcity and how these choices show our values. We talked about equity vs efficiency. Equity is making things more equal for everyone, like taxing people that do the same work, and efficiency is defined economically as producing things that people want at a low cost.

A cost is anything that consumes resources.

We then talked about opportunity costs and an in depth discussion on an example involving Bruce Springsteen tickets. Opportunity costs are what you must give up to get things - the net value of the next best option. (Benefits - costs). In class we talked about a free Bruce ticket vs a Barry Manilow ticket that I value at $50 but I can buy for $40. If I valued Bruce for nothing, the opportunity cost of seeing Bruce is $10 (the saved $10 of seeing Barry).

However, everybody values Bruce! So what is the minimum that I have to value Bruce at to see him? Well if I valued Bruce at $11 then I am saving $11 over the $10 of Barry so I should go to Bruce. But I could also value Bruce at $1 million and then I would definitely go to Bruce. I may or may not value Bruce more (I do.) But the value of Bruce must be at least $11.

Class 3 - There's No Scarcity in Heaven (there's also no economists)

In our third class, Rizzo defined economics in 4 words: man act with purpose. This means exactly what it says. But the reason behind this is that the world is characterized by scarcity.

Scarcity is the condition where there is an unlimited want for limited goods and we must choose. There's not enough rare coins for everyone in the world to have. There's also not enough Vince Lombardi trophies for the Bills, Jets, or Eagles. But everyone wants one. We live in a world full of scarcity.

But in heaven there is no scarcity. If I want a bear riding a unicycle as a pet I can snap my fingers and it appears. The unlimited want is matched by unlimited goods in heaven.

But how do us mortals deal with scarcity? We economize. We use rationality and compare expected benefits with the expected costs. However, the values and costs are individualized. Rizzo used sky diving as an example. I personally would love to pay for sky diving. I have the expected benefit of being able to sky dive, and the expected cost of about $200. Rizzo on the other hand would need to be paid to sky dive. He has the expected benefit of getting money. And the expected cost of dying. Each person is different when it comes to dealing with scarcity.

Economics deals with so many factors, not only financial costs and benefits, but also popularity and ethics.

Rizzo then talked about incentives again in describing England sending prisoners to Australia. The captains were paid before the prisoners arrived so the prisoners were not treated well. However, when they switched the payment to being based on how many prisoners lived, then the survival rates improved. The sailors had to try and keep the prisoners alive so they would get paid. The sailors didn't try and keep the prisoners alive because they didn't care and it would cost them money. Whether or not this posses an immoral situation on the sailors may be a problem, but I'm more scared for the kangaroos who have to deal with prisoners trying to steal their Joeys.